The Outrage Factory Comes for Rural Healthcare 6.11.26

The outrage factory has been working overtime this year to keep Minnesota reeling. Vice President J.D. Vance recently wrote a referral letter to the U.S. Department of Justice, urging a criminal investigation into Minnesota’s Governor and Attorney General for failing to act on widespread fraud in Minnesota social-service programs. The outrage filtered to the bureaucrats and is now making life miserable for eligible Medicaid patients and the people providing health services.

When Minnesota’s Department of Human Services (DHS) launched its “Revalidate 2026’ anti-fraud initiative, officials said they were protecting taxpayers. But in places like Two Harbors, MN, the crackdown has left healthcare providers unable to serve patients, unable to collect payments, and wondering whether they will survive.

Intended to identify Medicaid fraud, DHS’s Revalidate 2026, a highly aggressive regulatory mandate launched at the beginning of the year, forced every Medicaid contractor to “revalidate” by June 1. The revalidation process is typically conducted by each authorized provider every 3 to 5 years to maintain operating status. 

An article I wrote for the weekly North Shore Journal focused on the effects of the DHS revalidation process on non-emergency medical transport (NEMT) providers, almost all of which are small businesses. DHS apparently became overburdened while trying to ferret out the fraudsters, and it was unable to “revalidate” most of the legit providers by the May 31 deadline. So on June 1, DHS summarily terminated all providers, stopped scheduled payments to them, and prevented them from accepting patients that had been relying on the service.

There is no easy way to determine the exact number of small businesses, nonprofits, and cooperatives that provide Medicaid-reimbursed health services in Minnesota. There are an estimated 5,000 organizations of all sizes across the state authorized to provide services. 

One small co-op  I interviewed is Cardinal Comfort Care in Two Harbors, MN, which provides a variety of support services, including residential care, respite care, and non-emergency medical transport (NEMT) under its Redbird Transportation. Cardinal is organized as a Cooperative, which means every contractor it employs is also an owner. In a sparsely populated part of Minnesota, those people are a lifeline for the poor and elderly residents of Lake County, pop. 11,000.

Over 70% of Cardinal’s revenue comes from Medicaid reimbursements. It has always complied with DHS requirements. It’s had no corrective actions from DHS or major complaints from clients. The staff is in a mad scramble to find alternate sources of income. Cardinal’s people are dedicated to caring for others with compassion and commitment and are collectively heartsick that DHS has blocked them and thousands like them from doing a job they feel called to do.

Intended to identify Medicaid fraud, DHS’s Revalidate 2026, a highly aggressive regulatory mandate launched at the beginning of the year, forced every Medicaid contractor to “revalidate” by June 1. The revalidation process is typically conducted by each authorized provider every 3 to 5 years to maintain operating status. 

Before the Revalidate 2026 crackdown began, there were approximately 350 to 400 distinct NEMT providers, such as Redbird, across the state. A large percentage are small, localized, family-run, or worker-owned businesses that operate just a handful of vehicles to keep rural seniors connected to their doctors. There are over 800 distinct home care and PCA agencies, such as Cardinal, across Minnesota that bill DHS directly to keep vulnerable adults living independently in their own homes.

With a top-down bureaucratic mandate like the "off-cycle revalidation," the structural disparity between "Big Medicine" and "Main Street Medicine" becomes painfully obvious. The practical effect may be the elimination of many smaller providers. 

A local operator like Cardinal Care often relies on a handful of people who wear five different hats at once—acting as CEO, CFO, dispatcher, HR manager, and sometimes getting behind the wheel as a driver or an in-home aide. When DHS stalls tens of thousands of dollars in routine reimbursements or abruptly changes status from "pending" to "terminated" due to DHS’s own internal processing backlogs, a multi-million dollar metro network barely registers a blip. But for a small provider on the North Shore where DHS-reimbursed services account for 70% or more of total revenue, that state backlog isn't just an administrative kerfuffle—it is an existential threat to their survival and a direct assault on the local workers trying to keep the community afloat.

Fraud against our governments is not something new. It didn’t start when we welcomed Somali refugees. It isn’t even unique to Democrats--see the current Republican controlled government.

In every war this country has fought, nefarious players who may have passed for honest citizens have reaped a stunning harvest of ill-gotten fortunes. Take World War II: In the months before Japan attacked Pearl Harbor, an obscure Senator from Missouri named Harry S. Truman personally investigated fraud, identified bad actors, and protected honest contractors rather than punishing everyone.

Frankly, after looking at the Cardinal situation, one can’t help but wonder whether the practical result of DHS’s approach will be a system dominated by a small number of large healthcare organizations that have whole departments devoted to churning through state paperwork and enough capital to absorb temporary funding delays, while cutting wages of the actual people on the front lines. 

Disrupting fundamental services that DHS oversees because the outrage factory is kicking out a steady stream of its vitriolic produce is a cowardly and dangerous thing to do. You don’t get the ticks off your dog by drowning poor Fido. You get them off by getting your hands dirty, one tick at a time.